- 11 - taxpayer’s level of education is a relevant factor. See Niedringhaus v. Commissioner, supra at 211; Stephenson v. Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th Cir. 1984). Although respondent must prove an underpayment of tax in support of the fraud penalty, respondent’s burden is met here by proof of unreported income. An underpayment will exist where unreported gross receipts are not exceeded by costs of goods sold and deductible expenses. In establishing the underpayment, the Commissioner may not simply rely on the taxpayer’s failure to prove error in the deficiency determination. DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16 (2d Cir. 1992); Parks v. Commissioner, 94 T.C. 654, 660-661 (1990); Otsuki v. Commissioner, 53 T.C. 96, 106 (1969). However, upon clear proof of unreported receipts, even in a criminal case, the burden of coming forward with offsetting costs or expenses generally shifts to the taxpayer. See Siravo v. United States, 377 F.2d 469, 473-474 (1st Cir. 1967); Elwert v. United States, 231 F.2d 928, 933 (9th Cir. 1956). Petitioner stipulated that he had unreported gross receipts for all 3 tax years. Petitioner has failed to show that the receipts were offset by deductible costs or expenses. As a result, it is established by clear and convincing evidence that petitioner had an underpayment of tax for each of the years.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011